# OIL AND NATURAL GAS CORPORATION LTD v. M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR

- **Citation:** [2022] 4 S.C.R. 926
- **Court:** Supreme Court of India
- **Decided:** 2022-04-27
- **Case number:** Civil Appeal No. 2042 of 2022
- **Bench:** Dr. Dhananjaya Y Chandrachud, Surya Kant, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oil-and-natural-gas-corporation-ltd-v-m-s-discovery-enterprises-pvt-ltd-anr-36355
- **Pages:** 52

## Headnote

Arbitration - Group of companies doctrine - Invocation of -
Held: An arbitration agreement entered into by a company within a
group of companies, can bind its non-signatory affiliates or sister
concerns if the circumstances demonstrate a mutual intention of the
parties to bind both the signatory and affiliated, non-signatory
parties - A non-signatory may be bound by the arbitration
agreement where: (i) there exists a group of companies; and (ii)
parties have engaged in conduct or made statements indicating an
intention to bind a non-signatory - In deciding whether a company
within a group of companies which is not a signatory to arbitration
agreement would nonetheless be bound by it, the law considers the
following factors: (i) mutual intent of the parties; (ii) relationship
of a non-signatory to a party which is a signatory to the agreement;
(iii) commonality of the subject matter; (iv) composite nature of the
transaction; and (v) performance of the contract.
Arbitration and Conciliation Act, 1996 - s.37 - Decision of
Arbitral Tribunal that it lacks jurisdiction - Challenge to - Held: If
the arbitral tribunal accepts a plea that it lacks jurisdiction, the
order of the tribunal is amenable to a challenge in appeal u/s.37(2)(a)
- In exercise of the appellate jurisdiction, the court must have due
deference to the grounds which weighed with the tribunal in holding
that it lacks jurisdiction having regard to the object and spirit
underlying the statute which entrusts the arbitral tribunal with the
power to rule on its own jurisdiction - Decision of the tribunal that
it lacks jurisdiction is not conclusive because it is subject to appellate
remedy u/s.37(2)(a) - However, in exercise of this appellate power,
the court must be mindful of the fact that the statute has entrusted
the arbitral tribunal with the power to rule on its own jurisdiction
with the purpose of facilitating the efficacy of arbitration as an
institutional mechanism for resolution of disputes.
A
B
C
D
E
F
G
H
927
Allowing the appeal, the Court
HELD: 1. A signed written agreement to submit a present
or future dispute to arbitration does not exclude the possibility
of an arbitration agreement binding a third party. A non-signatory
may be bound by the operation of the group of companies doctrine
as well as by the operation of the principles of assignment, agency
and succession. A party, which is not a signatory to a contract
containing an arbitration clause, may be bound by the agreement
to arbitrate if it is an alter ego of a party which executed the
agreement. This constitutes a departure from the ordinary
principle of contract law that every company in a group of
companies is a distinct legal entity. A non-signatory may be bound
by the arbitration agreement where: (i) There exists a group of
companies; and (ii) Parties have engaged in conduct or made
statements indicating an intention to bind a non-signatory.
[Para 23][955-H; 956-A-C]
2. In deciding whether a company within a group of
companies which is not a signatory to arbitration agreement would
nonetheless be bound by it, the law considers the following factors:
(i) The mutual intent of the parties; (ii) The relationship of a nonsignatory to a party which is a signatory to the agreement; (iii)
The commonality of the subject matter; (iv) The composite nature
of the transaction; and (v) The performance of the contract.
Consent and party autonomy are undergirded in Section 7 of the
Act of 1996. However, a non-signatory may be held to be bound
on a consensual theory, founded on agency and assignment or
on a non-consensual basis such as estoppel or alter ego.
[Para 26][957-G-H; 958-A-C]
3.1. In the present case, ONGC's attempt at the joinder of
JDIL to the proceedings was rejected without adjudication of
ONGC's application for discovery and inspection of documents
to prove the necessity for such a joinder. By failing to consider
the application for discovery and inspection, the Tribunal
foreclosed itself from inqui

## Text

_Characters 0–39,963 of 112,960. This is a partial read: ask again with offset=39963 for what follows._

A
B
C
D
E
F
G
H
926
SUPREME COURT REPORTS
[2022] 4 S.C.R.
[2022] 4 S.C.R. 926
926
OIL AND NATURAL GAS CORPORATION LTD.
 v.
M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR.
(Civil Appeal No. 2042 of 2022)
APRIL 27, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SURYA KANT
AND VIKRAM NATH, JJ.]
Arbitration - Group of companies doctrine - Invocation of -
Held: An arbitration agreement entered into by a company within a
group of companies, can bind its non-signatory affiliates or sister
concerns if the circumstances demonstrate a mutual intention of the
parties to bind both the signatory and affiliated, non-signatory
parties - A non-signatory may be bound by the arbitration
agreement where: (i) there exists a group of companies; and (ii)
parties have engaged in conduct or made statements indicating an
intention to bind a non-signatory - In deciding whether a company
within a group of companies which is not a signatory to arbitration
agreement would nonetheless be bound by it, the law considers the
following factors: (i) mutual intent of the parties; (ii) relationship
of a non-signatory to a party which is a signatory to the agreement;
(iii) commonality of the subject matter; (iv) composite nature of the
transaction; and (v) performance of the contract.
Arbitration and Conciliation Act, 1996 - s.37 - Decision of
Arbitral Tribunal that it lacks jurisdiction - Challenge to - Held: If
the arbitral tribunal accepts a plea that it lacks jurisdiction, the
order of the tribunal is amenable to a challenge in appeal u/s.37(2)(a)
- In exercise of the appellate jurisdiction, the court must have due
deference to the grounds which weighed with the tribunal in holding
that it lacks jurisdiction having regard to the object and spirit
underlying the statute which entrusts the arbitral tribunal with the
power to rule on its own jurisdiction - Decision of the tribunal that
it lacks jurisdiction is not conclusive because it is subject to appellate
remedy u/s.37(2)(a) - However, in exercise of this appellate power,
the court must be mindful of the fact that the statute has entrusted
the arbitral tribunal with the power to rule on its own jurisdiction
with the purpose of facilitating the efficacy of arbitration as an
institutional mechanism for resolution of disputes.
A
B
C
D
E
F
G
H
927
Allowing the appeal, the Court
HELD: 1. A signed written agreement to submit a present
or future dispute to arbitration does not exclude the possibility
of an arbitration agreement binding a third party. A non-signatory
may be bound by the operation of the group of companies doctrine
as well as by the operation of the principles of assignment, agency
and succession. A party, which is not a signatory to a contract
containing an arbitration clause, may be bound by the agreement
to arbitrate if it is an alter ego of a party which executed the
agreement. This constitutes a departure from the ordinary
principle of contract law that every company in a group of
companies is a distinct legal entity. A non-signatory may be bound
by the arbitration agreement where: (i) There exists a group of
companies; and (ii) Parties have engaged in conduct or made
statements indicating an intention to bind a non-signatory.
[Para 23][955-H; 956-A-C]
2. In deciding whether a company within a group of
companies which is not a signatory to arbitration agreement would
nonetheless be bound by it, the law considers the following factors:
(i) The mutual intent of the parties; (ii) The relationship of a nonsignatory to a party which is a signatory to the agreement; (iii)
The commonality of the subject matter; (iv) The composite nature
of the transaction; and (v) The performance of the contract.
Consent and party autonomy are undergirded in Section 7 of the
Act of 1996. However, a non-signatory may be held to be bound
on a consensual theory, founded on agency and assignment or
on a non-consensual basis such as estoppel or alter ego.
[Para 26][957-G-H; 958-A-C]
3.1. In the present case, ONGC's attempt at the joinder of
JDIL to the proceedings was rejected without adjudication of
ONGC's application for discovery and inspection of documents
to prove the necessity for such a joinder. By failing to consider
the application for discovery and inspection, the Tribunal
foreclosed itself from inquiring into whether there was sufficient
material to establish the application of the group of companies
doctrine. The application for discovery and inspection was indeed
relevant to the exercise which was being carried out by the
Tribunal. [Paras 26 and 30][958-C-D; 959-E-F]
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR.
A
B
C
D
E
F
G
H
928
SUPREME COURT REPORTS
[2022] 4 S.C.R.
3.2. The interim award of the first Arbitral Tribunal stands
vitiated because of: (i) The failure of the arbitral tribunal to decide
upon the application for discovery and inspection filed by ONGC;
(ii) The failure of the arbitral tribunal to determine the legal
foundation for the application of the group of companies doctrine;
and (iii) The decision of the arbitral tribunal that it would decide
upon the applications filed by ONGC only after the plea of
jurisdiction was disposed of. There was a fundamental failure of
the first Arbitral Tribunal to address the plea raised by ONGC
for attracting the group of companies doctrine. Moreover, by
leaving the application filed by ONGC for discovery and
inspection unresolved, the first Arbitral Tribunal failed to allow
evidence which may have had a bearing on the issue of whether
JDIL could be considered to have an economic unity with DEPL
and could hence be made a party to the arbitral proceedings.
[Paras 50 and 51][974-B-F]
Chloro Controls India Pvt. Ltd. v. Severn Trent Water
Purification Inc. & Ors (2013) 1 SCC 641 : [2012] 13
SCR 402 - relied on.
Ameet Lalchand Shah & Ors. v. Rishabh Enterprises &
Anr. (2018) 15 SCC 678 : [2018] 6 SCR 1001 -
affirmed.
Indowind Energy Ltd. v. Wescare (I) Ltd. & Anr. (2010)
5 SCC 306 : [2010] 5 SCR 284; Cheran Properties Ltd.
v. Kasturi & Sons Ltd. & Ors (2018) 16 SCC 413 :
[2018] 4 SCR 1063; MTNL v. Canara Bank & Ors.
(2020) 12 SCC 767 : [2019] 11 SCR 660; Duro
Felguera v. Gangavaram Port Limited (2017) 9 SCC
729 : [2017] 10 SCR 285; referred to Reckitt Benckiser
(India) P Ltd. v. Reynders Label Printing (2019) 7 SCC
62 : [2019] 8 SCR 966; Ssangyong Engineering and
Construction Company Limited v. National Highways
Authority of India (2019) 15 SCC 131 : [2019]
7 SCR 522; M/s Dyna Technologies Pvt. Ltd. v. M/s
Crompton Graves Ltd. (2019) 20 SCC 1 : [2019]
15 SCR 295; Associate Builders v. DDA (2015) 3 SCC
49 : [2014] 13 SCR 895 - referred to.
Redfern and Hunter on International Arbitration, 5th
Ed. - 2.13, pp. 89-90; Gary Born, International
Commercial Arbitration 2nd Edn., Vol. 1, at page
1418; John Fellas, Compelling Signatories to Arbitrate
A
B
C
D
E
F
G
H
929
with Non-Signatories, New York Law Journal (March
28, 2022) - referred to.
Case Law Reference
[2010] 5 SCR 284
referred to
Para 7
[2012] 13 SCR 402
relied on
Para 13 (viii)
[2018] 4 SCR 1063
referred to
Para 13 (viii)
[2019] 11 SCR 660
referred to
Para 13 (viii)
[2018] 6 SCR 1001
affirmed
Para 19
[2017] 10 SCR 285
referred to
Para 20
[2019] 8 SCR 966
referred to
Para 21
[2019] 7 SCR 522
referred to
Para 35
[2019] 15 SCR 295
referred to
Para 35
[2014] 13 SCR 895
referred to
Para 36
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2042
of 2022.
From the Judgment and Order dated 27.06.2012 of the High Court
of Judicature at Bombay in Arbitration Petition No. 814 of 2011.
K.M. Nataraj, ASG, Somiran Sharma, K. R. Sasiprabhu, Tushar
Bhardwaj, Vishnu Sharma, Vinayak Sharma, Vinayak Maini, Advs. for
the appellant.
Shyam Divan, Sr. Adv., Rahul Narichania, Sr. Adv., Ajay Bhargava,
Ms. Vanita Bhargava, Aseem Chaturvedi, Ms. Trishala Trivedi, Milind
Sharma for M/S. Khaitan & Co., Advs. for the respondents.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
This judgment has been divided into sections to facilitate analysis.
These are:
A
Facts........................................................................3*
A.1. Transferred cases arising out of the arbitration....11*
B
Submissions of Counsel...............................................14*
C
Analysis..................................................................21*
C.1.
Group of Companies Doctrine............................21*
C.2.
Standard for Review of the Interim Arbitral Award...37*
D
Conclusion...............................................................58*
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR.
* Denotes pagination as per the original Judgement.
A
B
C
D
E
F
G
H
930
SUPREME COURT REPORTS
[2022] 4 S.C.R.
A Facts
1. The appeal arises from a judgment dated 27 June 2012 of the
High Court of Judicature at Bombay by which an appeal under Section
37 of the Arbitration and Conciliation Act, 19961 has been dismissed. Oil
& Natural Gas Corporation Limited2 instituted an appeal against an interim
award dated 27 October 20103 of the Arbitral Tribunal holding that the
second respondent - Jindal Drilling and Industries Limited4 was not a
party to the arbitration agreement and must be deleted from the array of
parties. The interim award was challenged in an appeal which was
dismissed by the impugned judgment.
2. On 22 March 2006, ONGC awarded a contract to Discovery
Enterprises Private Limited5, the first respondent, which is acompany
belonging to the DP Jindal Group, for operating a floating, production,
storage and offloading vessel6. Pursuant to the stipulation contained in
clause 25.7.11 of the contract, a vessel called Crystal Sea was imported
on 11 May 2006. ONGC paid the customs duty in the amount of Rs.55.78
crores on the understanding that the vessel would be re-exported after
work was complete under duty drawback whose formalities would be
completed by DEPL. The vessel left Indian territorial waters and did not
return. According to ONGC, DEPL failed to complete the formalities
for duty drawback and did not compensate ONGC for customs duty and
other expenses incurred in the amount of Rs.63.88 crores.
3. Clause 37 of the contract between ONGC and DEPL provides
for the settlement of disputes of the parties through arbitration. On 25
April 2008, ONGC invoked arbitration against DEPL and JDIL and
claimed an amount of Rs.63.88 crores. An Arbitral Tribunal consisting
of Mr Justice SP Kurdukar (Retd.), Mr Justice MS Rane (Retd.)and Mr
S Venkateswaran (Senior Advocate) was constituted. In its statement
of claim filed before the Arbitral Tribunal, ONGC set up the case that
DEPL and JDIL belonged to the DP Jindal Group of Companies and
since they constitute a single economic entity, the corporate veil should
be lifted to compel the non-signatory, JDIL, to arbitrate. According to
1 "Act of 1996"
2 "ONGC"
3 "interim award"
4 "JDIL" or the "second respondent"
5 "DEPL"
6 "vessel"
A
B
C
D
E
F
G
H
931
ONGC, DEPL is an alter ego and agent of JDIL. The statement of
claim read thus:
"17. It is submitted the Respondent no.1 was awarded the contract
by relying on the fact that it is Group Company of D P Jindal
group of companies and that the Respondent No.2, M/s Jindal
Drilling & Industries Ltd has a vital business interest in the
Respondent No.1, which can be said to be the alter ego of
Respondent No.2. In fact, the Respondent No.2 is the ultimate
beneficiary of the business of Respondent No.1. [...] Presently,
they are having three valid existing contracts with ONGC. DEPL
has close corporate unity with Jindal Group and in fact the
shareholders are almost common. Respondent No.1 has
throughout represented that they are group company of Jindal
apart from their representation in the bid they have been
representing that through the letter heads which clearly indicated
that they belong to a single group of companies, namely DP Jindal
Group of companies. M/s Jindal Drilling has also acknowledged
that the contractor M/s DEPL is a group company of Jindal Group
in their website in an article titled "Key due diligence observations".
A copy of the said article is annexed herewith and marked as
Annexure 8. Since Respondent No. 1 is liable to compensate
ONGC for the losses suffered by it, ONGC has adjusted the said
amount from the monies payable to Jindal Drilling and Industries
Limited as a security to satisfy the award to be passed in this
case.
18. As stated above, Respondent No.2 was supplying vessels and
rigs to ONGC under various contracts, for last many years. It is a
fact that the Respondent No.1 was formed as a group company
with the charter of introducing cutting-edge technology and
solutions to the oil and gas market in India. Respondent No.1 has
represented itself as a part of the DP Jindal group of companies
as seen from the company's website (www.discoveryepl.com).
A copy of the relevant extract from the website is attached
herewith and marked as Annexure A-9. The same web-based
representation was made in categorical and unequivocal manner
by Respondent No.1 in the bid submitted by them in connection
with the subject contract. The copy of the same is annexed
herewith and marked as Annexure-10. The Directors of the
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
932
SUPREME COURT REPORTS
[2022] 4 S.C.R.
Respondent No.1 are Mr. Manav Kumar and Mrs. Shilpa Agarwal,
son and daughter in law of Shri Naresh Kumar who is the Managing
Director of the Respondent No. 2 i.e, the Jindal Drilling and
Industries Ltd. The two companies operate out of the same
premises, same floor, same building i.e. Keshav Building, Bandra
Kurla Complex. Copies of the Letter Head of both the companies
addressed to the claimant is enclosed herewith and marked as
Annexure A-11 (colly). More significantly a prominent Jindal
Drilling Executive has taken an active interest in the negotiations
concerning the subject contract [...]. It makes it abundantly clear
that the activities of DEPL i.e. Respondent No.1 contractor are
an extension of the activities of Respondent No.2 who has set up
the Respondent No. 1 company as an agency to carry out its
activities. Therefore, it is submitted that the doctrine of group
company can be applied in this case - an arbitration agreement
signed by one company in a group of companies entitles (or
obligates) other group non-signatory companies, if the
circumstances surrounding the negotiation, execution of the
agreement show that the mutual intention of all the parties was to
bind non-signatories. This group companies constitute the same
"economic reality". This is evident when veil-piercing is done.
Copies of documents evidencing close relationship between both
the companies are annexed herewith as indicated above.
19. In any case, Respondent No.1 can be considered as an agent/
alter ego of Respondent No.2 because of its deep and pervasive
family links, apart from the fact that Respondent No. 2 is the
intended third-party beneficiary of this contract. The Arbitral
Tribunal has to determine these questions in accordance with
evidence and law. Further, there is corporate unity and cross
shareholdings in both the companies by shareholders, common to
both the companies.
[...]
21.It is submitted that this is a fit case where this Hon'ble Tribunal
has to pierce the corporate veil in order to see the acknowledged
the realities of Respondent No.1 being a group company of DP
Jindal Group. As submitted above, there is a clause 'corporate
unity' and applying the doctrine of group companies/alter ego/
ultimate beneficiary. This Tribunal has to hold Respondent No.2
A
B
C
D
E
F
G
H
933
also liable to compensate ONGC for the dues of respondent
No.1.The issue preferred to Tribunal is within the arbitration
agreement and under law and this Hon'ble Tribunal has jurisdiction
to entertain and decide the dispute."
4. An application under Section 16 of the Act of 1996 was filed by
JDIL seeking its deletion from the arbitral proceedings on the ground
that it is not a party to the arbitration agreement. ONGC responded to
the application. During the course of the proceedings, ONGC filed an
application on 5 January 2009 for discovery and inspection to support its
case that DEPL is an alter ego of the Jindal Group of companies. In
support of the application for discovery and inspection, ONGC pleaded
that:
(i)
DEPL and JDIL are group companies and that the former
is an agent or alter ego of the latter;
(ii)
There exists corporate and functional unity between them;
(iii)
DEPL is a corporate facade which has been created to
promote and extend the business of JDIL;
(iv)
JDIL is responsible for the acts of omission and commission
of DEPL on the basis of the group of companies doctrine;
(v)
DEPL has been created by the Jindal Group to render
services in the oil and gas sector and each entity of the
group is strategically formed to render certain services; and
(vi)
DEPL is working under the "fraternal hood" of the group
based on the admission on the corporate website of JDIL.
5. ONGC stated that the documentary evidence demonstrates
that there is a "close corporate unity and functional unity existing between
these two companies" and hence it was necessary to discover the
documents set out in the schedule to the application. The documents of
which discovery was sought are tabulated below:
"SCHEDULE OF DOCUMENTS
1. Memorandum of Association of Respondent No.2.
2. Articles of Association of Respondent No.2.
3. Ledger account of Respondent No.2 for the financial years
2003-04, 2004-05, 2005-06 and 2006-07.
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
934
SUPREME COURT REPORTS
[2022] 4 S.C.R.
4. Employees salary register of Respondent No.2 for the financial
years 2003-04, 2004-05, 2005-06 and 2006-07.
5. Titled document showing Respondent No.1's rights/ownership
over the registered office premises at Suite 110, Tower-I, 70
Najafgarh Road, B-39, New Delhi-110 015.
6. Titled document showing Respondent No.2's rights/ownership
over the office premises at 3rd Floor, Keshav Building, BandaKurla Complex, Banda (East), Mumbai-400 051.
7. Documents showing grant of telephone connection of the
following telephone and fax numbers at the Delhi office of
Respondent No. 1 and the payment of the bills of the said telephone
and fax numbers by Respondent No. 1 from the calendar years
2003 to 2007. (i) Telephone No.52531100, (ii) Fax No.52531191.
8. Documents showing grant of telephone connection of the
following telephone and fax numbers at the Mumbai office of
Respondent No. 2 and the payment of the bills of the said telephone
and fax numbers by Respondents from the calendar years 2003
to 2007. (i) Telephone Nos.26592889 & 55020047, (ii) Fax
No.26592630.
9. List of the contract bagged from ONGC so far the inception of
Respondent No.2.
10. List of crew members in the Drilling Unit "Noble Ed-Holt
awarded on 17.8.06 and Noble Charlie Yester on 2.12.06."
6. ONGC led evidence in support of the statement of claim. During
the course of the examination, ONGC's witness, Anindya Bhattacharya
who was working as Chief Manager(MM) of ONGC, produced
documents in support of claim. The production of documents was objected
to by JDIL on the ground of relevance and admissibility. During the
arbitral meeting on 7 July 2009, the Tribunal recorded the following
minutes:
"Per Tribunal :
The documents produced by the witness Anindya Bhattacharya
(CW-1) along with his affidavit dated June 26th 2009 and
annexures 1 to 10 are taken on record. Mr. Rahul Narichania, Ld.
Advocate for Respondent No. 2 objects to these documents being
taken on record on the ground that the same are not relevant and
A
B
C
D
E
F
G
H
935
admissible as far as the Respondent No. 2 is concerned. He further
stated that he will cross examine the witness on the documents
without prejudice to his rights that the said documents were neither
relevant nor admissible in evidence and ought not to be marked as
exhibits.
The rival contentions will be decided while disposing of the
application made under Section 16 of the Arbitration &Conciliation
Act, 1996. It is also madeclear that merely because the witness
has been cross examined on behalf of the Respondent No. 2 on
the documents, the documents do not automatically stand exhibited.
Mr. Rajiv Kumar objects to the procedure recorded above. The
Claimants do not waive any rights in this behalf."
7. By its interim award dated 27 October 2010, the Arbitral Tribunal
held that it lacked the jurisdiction to arbitrate on the claim against JDIL,
which was not a party to the arbitration agreement. The tribunal relied
on the judgment of this Court in Indowind Energy Ltd. v. Wescare (I)
Ltd. & Anr.7. The conclusion of the Tribunal was that JDIL is not a
signatory of the arbitration agreement and hence could not be impleaded
as a party to the proceedings. The Arbitral Tribunal held:
"20. After considering rival contentions, the arbitral tribunal is of
the opinion that it may not be permissible for it to go beyond the
ambit of section 7 of the act. The word 'party' is defined under
section 2(1)(h) means a party to an Arbitration Agreement and
the arbitration agreement has been defined under section 7 of the
Act. [...] To put it differently, this arbitral tribunal lacks the
jurisdiction to investigate, enquire into and record any
finding on the basis of claim petition paragraphs 17 to 21
against M/s Jindal Ltd/ Respondent No.2. The arbitral
tribunal is therefore of the opinion that the claim petition
of ONGC vis a vis M/s Jindal Ltd./ Respondent No.2 is
untenable for want of jurisdiction under the Act. The arbitral
tribunal makes it clear that the position of M/s Jindal Ltd/
respondent no.2 considered only on the basis of the
provisions contained in section 2(1)(h) and section 7 of the
Act."
(emphasis supplied)
7 (2010) 5 SCC 306 ["Indowind"]
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
936
SUPREME COURT REPORTS
[2022] 4 S.C.R.
8. JDIL was accordingly struck off the array of parties. ONGC
filed an appeal under Section 37 before the Bombay High Court which
was dismissed on 27 June 2012 with the following observations:
"16. As observed hereinabove, there is no evidence tendered
before Arbitral Tribunal that DEPL and JDIL had common
shareholders and common board of directors. Even if that had
been the case, the Hon'ble Supreme Court of India in Indowind
Versus Wescare case (supra) has held in terms that merely
because two companies have common shareholders and directors,
they do not become a single entity. In the instant case also, the
Arbitral Tribunal has correctly held that merely because the two
companies may at one point of time have had a common address
and telephone number, it does not make them one economic unit.
The mere fact that the son and daughter-in-law of the managing
director of JDIL are directors in DEPL also does not and cannot
establish that these companies are one and the same. There is
also no credible evidence to show that because of the alleged
nexus between the two companies, ONGC awarded the said
contract to DEPL. Even assuming this to be correct, it does not
take the case of ONGC any further. JDIL is admittedly not a
party to the contract and cannot be liable under the said contract
which is only between ONGC and DEPL. If ONGC wanted to
bind JDIL to the said contract, it should have asked JDIL to be a
party to the said contract. In fact, this court inquired from learned
Advocate appearing for ONGC as to why ONGC did not insist
on JDIL signing the said contract when admittedly there are other
contracts which are entered into between ONGC and JDIL.
However, the learned advocate appearing for ONGC had no
answer to the same. In response, he only submitted that ONGC
has also filed suit being 2947 of 2011 in this court in which DEPL
and JDIL have been arrayed as the defendants."
9. The judgment of the High Court was challenged by ONGC
under Article 136 of the Constitution. The Arbitral Tribunal delivered its
final award dated 6 June 20138 and, while allowing the claim of ONGC,
held that it is entitled to recover an amount of Rs.63.87 crores and USD
1,756,197.50 together with interest at 9% per annum and legal costs.
The counter claim filed by DEPL was dismissed.
8 "Arbitral Award in the first proceeding"
A
B
C
D
E
F
G
H
937
10. At this stage, it would also be necessary to note that in the
course of its interim award, the Arbitral Tribunal dealt with the applications
filed by ONGC on 5 January 2009 for discovery of documents and
inspection. The Arbitral Tribunal noted ONGC's contention that its
application for discovery and inspection should be heard and disposed of
first on merits and that the application filed by JDIL under Section 16
should be heard thereafter so that all relevant documents would emerge
before the Arbitral Tribunal. The Arbitral Tribunal, however, directed
that the application for discovery and inspection filed by ONGC be
"deferred until the issue of the jurisdiction is decided".
A.1. Transferred cases arising out of the arbitration
11. During the pendency of the arbitration between ONGC and
DEPL, ONGC withheld a sum of US$14,772,408.54 towards recovery
of its claim of Rs.64.88 crores against four contracts with JDIL. By a
letter dated 24 October 2007, JDIL sought the release of the sum withheld
together with interest failing which it stated that it would exercise its
right to take legal recourse. ONGC replied to the letter on 5 May 2008
stating that they are withholding the dues as an adjustment against the
dues owed to ONGC by DEPL. Aggrieved by the deductions made by
ONGC under its four contracts for drilling services, JDIL invoked
arbitration on 4 February 2010.AnArbitral Tribunal consisting of Ms
Justice Sujata Manohar (Retd.), Mr Justice BN Srikrishna (Retd.), and
Mr Justice MS Rane (Retd.) was constituted. In the meanwhile, ONGC
instituted a declaratory suit against JDIL and DEPL before the Bombay
High Court which is presently pending. The Arbitral Tribunal, by a
common award dated 9 October 2013,9 directed ONGC to pay JDIL an
amount of US$14,772,495.55/- together with interest at 4% per annum
calculated from the due date of each invoice till the date of payment or
realisation. The Arbitral Tribunal dealt with the submission of ONGC
that DEPL and JDIL belong to the same group thus entitling ONGC to
make the deductions. Rejecting the contention of ONGC, the Arbitral
Tribunal held:
"25. There is hardly any evidence to support the plea of the
Respondent that DEPL and the Claimant are one and the same
company. Both DEPL and the Claimant are group companies of
D.P. Jindal group of companies. Although the directors of DEPL
9 "Arbitral Award in the second proceeding"
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
938
SUPREME COURT REPORTS
[2022] 4 S.C.R.
are the son and daughter-in-law of the managing director of the
Claimant, and the two companies, for some time, shared a common
office and telephone numbers, that does not make the two
companies one. Both are subsidiaries of the main company and
both have independent legal existence. DEPL was incorporated
in the year 2003. The Claimant is a public limited company listed
on the stock exchange and was incorporated in the year 1983.
26. [...] The facts of the present case are totally different and do
not warrant lifting of corporate veil, assuming there is one. The
evidence in the present case does not justify the application of
"lifting the corporate veil". In respect of the contract which was
entered into by the Respondent with DEPL, the tender was floated
by ONGC in 2005 and the contract was entered into in 2006.
There is no material to show that the Respondent awarded the
contract to DEPL because it was in fact the claimant and/ or was
supported by the claimant. The minutes of the meeting held by
the Respondents for short-listing of bidders in respect of the
contract have not been produced. The only witness produced by
ONGC was not present at the meetings held by the executive
purchase committee when the deliberations on the award of the
contract recommended bidder took place. [...] There is no
evidence to show that in order to secure the said contract, DEPL
represented that it was a part of the Claimant group. [...]
 27. There is no guarantee or letter of "comfort" from the Claimant
to the Respondent in respect of the liabilities, if any, of DEPL
under its contract with ONGC. [...]
[...]
30. In the present case the Claimant and DEPL have throughout
maintained their separate legal character. There is no evidence to
indicate that they ever represented to the Respondent that they
are one company or that the Claimant will be liable under the
contract of the Respondent with DEPL.
31. In the present case the Respondent ONGC had earlier initiated
arbitration proceedings against both DEPL and the Claimant before
an Arbitral Tribunal [...]. By its 'interim final award' dated 2710-2010, the Arbitral Tribunal held that in the dispute between the
Respondent and DEPL, the Claimant could not be impleaded.
[...] The findings of the earlier arbitral tribunal and the High Court
A
B
C
D
E
F
G
H
939
in its order of 27 June 2012 support our present conclusions, and
we respectfully agree with the same."
12. DEPL was not a party to the above arbitral proceedings which
were initiated by JDIL. ONGC instituted petitions10 under Section 34 of
the Act of 1996 for challenging the Arbitral Award in the second
proceeding in respect of the four contracts of JDIL. The petitions were
dismissed by a Single Judge of the Bombay High Court on 28 April
2015. ONGC filed an appeal11 under Section 37 of the Act of 1996
during the pendency of the special leave petition arising from the interim
award of the Arbitral Tribunal dated 27 October 2010, consisting of
Mr Justice SP Kurdukar (Retd.), Mr Justice MS Rane (Retd.) and Mr S
Venkateswaran. ONGC sought a transfer of the appeals lodged before
the Bombay High Court against the judgment of the Single Judge
dismissing the petitions under Section 34 for challenging the Arbitral
Award in the second proceeding. The transferred cases12 have come up
before this Court together with the special leave petition arising out of
the interim award dated 27 October 2010.
B Submissions of Counsel
13. Mr KM Nataraj, Additional Solicitor General13, appearing on
behalf of ONGC submitted that:
(i)
The case of ONGC is that DEPL and JDIL constitute one
single commercial entity and that ONGC is hence entitled
by law to compel JDIL to participate in the arbitration
proceedings so as to enforce the award against it;
(ii)
Though evidence was available with ONGC to buttress the
above claim, it filed an application for discovery and
inspection to secure material which was within the
possession, control and custody of JDIL. However, with
the deletion of JDIL from the array of parties, the application
for discovery and inspection has been rendered otiose;
(iii)
The Arbitral Tribunal has not enquired into the facts at all,
despite the contention of ONGC that JDIL is a necessary
party;
10 Arbitration Petition No. 587, 767, 768 and 1045 of 2014
11 Arbitration Appeal Nos. 446 to 449 of 2015
12 Transferred Case (Civil) Nos. 47, 48, 49 and 50 of 2016
13 "ASG"
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
940
SUPREME COURT REPORTS
[2022] 4 S.C.R.
(iv)
The Arbitral Tribunal has merely held, on the basis of the
legal principle underlying Section 7 of the Act of 1996 and
privity of contract, that JDIL which is not a signatory to the
arbitration agreement cannot be impleaded in the arbitral
proceedings;
(v)
After the application for discovery and inspection was
opposed by JDIL, the Arbitral Tribunal deferred its decision
until the issue of jurisdiction was resolved on the application
filed by JDIL under Section 16 of the Act of 1996;
(vi)
The interim award did not consider or hear the application
for discovery and inspection under Section 16. The decision
has been rendered purely on the premise that anon-signatory
to the arbitration agreement cannot be impleaded as a party;
(vii)
ONGC has been precluded from tendering evidence that
JDIL could be brought within the fold of arbitration on the
basis of the group of companies doctrine;
(viii) While the Arbitral Tribunal has relied on the decision of this
Court in Indowind (supra), the subsequent decisions of this
Court have accepted and applied the group of companies
doctrine. These decisions are:
a.
Chloro Controls India Pvt. Ltd. v. Severn Trent
Water Purification Inc. & Ors;14
b.
Cheran Properties Ltd. v. Kasturi & Sons Ltd.
& Ors;15 and
c.
MTNL v. Canara Bank & Ors.16. and
(ix)
The decision in Indowind (supra) is not good law in view
of the subsequent judgments of this Court. The Arbitral
Tribunal ought to have decided the jurisdictional issue after
parties were permitted to lead evidence, since the application
of the group of companies doctrine and the lifting of the
corporate veil involves mixed questions of law and fact.
The issue of jurisdiction and merits are inextricably
intertwined and a ruling premised exclusively on the
application of Section 7 of the Act of 1996 was improper.
14 (2013) 1 SCC 641 ["Chloro Controls"]
15 (2018) 16 SCC 413 ["Cheran Properties"]
16 (2020) 12 SCC 767 ["MTNL"]
A
B
C
D
E
F
G
H
941
14. Controverting the above submissions, Mr Shyam Divan, Senior
Counsel appearing on behalf of the JDIL has indicated in the following
tabulation:
(i)
ONGC's contentions;
(ii)
JDIL's response;
(iii)
Findings in the interim award of the Arbitral Tribunal; and
(iv)
The order of the High Court.
The tabulated statement is reproduced below for convenience of
reference:
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
942
SUPREME COURT REPORTS
[2022] 4 S.C.R.
A
B
C
D
E
F
G
H
943
15. The following submissions have been urged by Mr Shyam
Divan, Senior Counsel behalf of the respondent:
(i)
There is no disputing the factual position that DEPL is a
part of the DP Jindal Group, yet JDIL has no shareholding
in DEPL. There is neither any cross shareholding nor any
common directors;
(ii)
In 2010, DEPL ceased to be a part of the DP Jindal Group.
However, JDIL continues to be a part of the DP Jindal
Group of companies together with other group entities such
as Maharashtra Seamless Ltd. and Jindal Pipes Ltd.;
(iii)
JDIL is not a party to the arbitration agreement as required
under Section 7 of the Act of 1996 and cannot be held liable
for claims against DEPL since there is no evidence that
JDIL was a beneficiary of the contract between ONGC
and DEPL. No letter of guarantee or of comfort was issued
by JDIL on behalf of DEPL in favour of ONGC;
(iv)
The Bombay High Court has correctly held that no evidence
was tendered before the Arbitral Tribunal that DEPL and
JDIL had common shareholders or common directors;
(v)
The arbitral award has discussed ONGC's claim that DEPL
and JDIL belong to the same group of companies and came
to the conclusion that there is not "a tickle of evidence"
that JDIL played any role in the negotiations leading up to
the contract or that thereafter JDIL participated in the
execution of the contract on behalf of the DEPL. Hence,
the group of companies doctrine cannot be invoked to indict
JDIL for the alleged acts and omissions of DEPL;
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
944
SUPREME COURT REPORTS
[2022] 4 S.C.R.
(vi)
Under Section 7 of the Act of 1996,theremust be an
agreement between the parties to submit to arbitration. The
expression 'party' is defined in Section 2(1)(h). The
keywords in both the provisions are "party to an arbitration
agreement" and an agreement by the party to submit to
arbitration. JDIL and DEPL are separate entities. DEPL
was incorporated in 2003. JDIL was incorporated in 1983.
Its shares are listed on the Bombay Stock Exchange. Though
DEPL belonged to the DP Jindal Group of Companies, it
ceased to remain a part of the group in 2010. The fact that
DEPL and JDIL shared a common office is of no relevance.
ONGC's witness asserted that he came to know that Mr
GD Sharma (who signed on behalf of DEPL) is an employee
of JDIL only after the signing of the contract. Hence there
was no representation that JDIL was bidding for the
contract. The association of the executive of JDIL was to
render assistance to DEPL and nothing more; and
(vii)
ONGC's witness has no knowledge of the facts since he
was not:
a.
Involved in the shortlisting of bidders;
b.
A part of the decision-making process for the award
of the contract;
c.
A party to the deliberations by the tender committee
for the award of the contract;
d.
Present at the time when the approval was given for
the award of the contract; and
e.
Party to the deliberations within ONGC.
The witness stated that he has accessed the website of
DEPL for the first time in June 2008, after the award of the
contract on 22 March 2006. Hence it is not open to ONGC
to claim that DEPL or JDIL represented to ONGC that
DEPL was a group company of JDIL or that ONGC
awarded the contract because of any representation by JDIL
on its website.
A
B
C
D
E
F
G
H
945
C Analysis
C.1. Group of Companies Doctrine
16. Section 717 provides for an arbitration agreement. For the
purpose of Part-I of the Act of 1996, an arbitration agreement is defined
to mean an agreement by the parties to submit disputes between them in
respect of a defined legal relationship, to arbitration. An arbitration
agreement may either be in the form of an arbitration clause in a contract
or take the form of a separate agreement. An arbitration agreement has
to be in writing but it may be contained in:
(i)
A document signed by the parties;
(ii)
An exchange of communication; and
(iii)
An exchange of a statement of claim and defence in which
an allegation that there exists an arbitration agreement is
not denied by the other party.
Sub-section (5) of Section 7 stipulates that the reference in a
contract to a document containing an arbitration clause constitutes an
arbitration agreement if:
(i)
The contract is written; and
(ii)
The reference is such as to make the arbitration clause a
part of the contract.
17 "7. Arbitration agreement.-
(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between them
in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or
in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication
including communication through electronic means which provide a record of the
agreement; or
(c) an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes
an arbitration agreement if the contract is in writing and the reference is such as to make
that arbitration clause part of the contract."
OIL AND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES
PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
946
SUPREME COURT REPORTS
[2022] 4 S.C.R.
17. The expression "party" is defined in Section 2(h) to mean a
party to an arbitration agreement.